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On May 8, 2024, then-Commerce Secretary Gina Raimondo told a House Appropriations hearing that a Chinese invasion of Taiwan, a South China Sea blockade and takeover of Taiwan Semiconductor Manufacturing Co. (TSMC) would be “absolutely devastating” to the U.S. economy. Her warning described a hypothetical, not a prediction of an imminent attack.
The vulnerability comes from concentrated production of advanced logic chips. Losing normal access to TSMC could disrupt artificial-intelligence servers, smartphones, cars, communications equipment and defense electronics even if the factories were not physically destroyed.
What Raimondo actually said
Lawmakers asked Raimondo what would happen if China invaded Taiwan, restricted U.S. commerce through the South China Sea and took control of TSMC. She answered that the effect on the American economy would be “absolutely devastating,” according to contemporaneous reporting from the hearing (Taiwan News, May 8, 2024).
Raimondo also said the United States obtained 92% of its leading-edge chips from TSMC in Taiwan at that time. That figure applies to a specific category and sourcing relationship; it does not mean TSMC makes 92% of every semiconductor or that Taiwan supplies 92% of all chips.
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Why TSMC is a strategic bottleneck
TSMC is primarily a pure-play foundry. It manufactures processors designed by other companies rather than competing with most customers through its own branded CPU or smartphone-chip lines. Its customers include Apple, AMD, Nvidia and Qualcomm.
At the most advanced process nodes, TSMC combines enormous scale, high yields, specialized engineering knowledge and a large ecosystem of suppliers. Samsung and Intel also have advanced manufacturing capabilities, but their available capacity, process maturity, customer qualifications and business models are not interchangeable with TSMC’s.
The Commerce Department said TSMC’s Arizona expansion was intended to serve customers including AMD, Apple, Nvidia and Qualcomm and reduce leading-edge supply-chain risk (Commerce Department, April 2024).
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What the 92% statistic does—and does not—mean
| Statement | What it measures |
|---|---|
| “The U.S. obtained 92% of its leading-edge chips from TSMC in Taiwan.” | A reported estimate of U.S. sourcing for leading-edge chips from one foundry and location, cited by Raimondo at the May 2024 hearing (Taiwan News). |
| “Taiwan produced 92% of the world’s leading-edge chips.” | A separate Commerce Department claim about global production located in Taiwan (Commerce Department). |
Neither statement means that TSMC or Taiwan produces 92% of all semiconductors. Mature-node logic, memory, analog, power, sensors and packaging have different suppliers and geographic patterns.
How a Taiwan crisis could hit the economy
The consequences would depend on whether China imposed a blockade, attempted an invasion, seized facilities or caused prolonged physical damage. The mechanisms below are plausible scenarios, not a quantified GDP forecast.
Immediate financial and supply shock
- Semiconductor shares and broader markets could fall as investors price in war, sanctions and shortages.
- Companies would ration existing inventories, bid up advanced processors and delay product launches.
- Insurance, shipping, energy and trade-finance costs would rise.
- Longer disruption could cut industrial output and increase recession risk.
Industries likely to feel it first
- AI and data centers: accelerators, high-performance CPUs and networking silicon would be difficult to replace quickly.
- Phones and consumer electronics: application processors and connectivity chips could delay devices and raise prices.
- Autos: advanced vehicle-computing systems would be exposed, even though many other automotive chips use mature nodes.
- Defense and aerospace: secure, high-performance processors and communications equipment could face delivery and qualification delays.
- Global cloud infrastructure: slower server deployment would affect companies far beyond the United States.
Europe’s automakers, Japan’s equipment and electronics industries, South Korean suppliers and Chinese technology manufacturers would also face disruption. China itself relies on imported semiconductor equipment, design software, materials and international customers, so taking control of a fab would not guarantee a usable chip supply.
Why occupying a fab would not guarantee production
A semiconductor factory is an operating system, not simply a building filled with machines. Continuous output depends on:
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- specialty gases, chemicals and clean-room consumables;
- precision logistics and spare parts;
- equipment maintenance and software support from overseas vendors;
- proprietary process recipes, design data and quality-control systems;
- customers able to receive chips, pay suppliers and provide technical feedback.
Combat, cyberattacks, sanctions, export controls or loss of foreign servicing could therefore shut a plant down or sharply degrade its yields. China might inherit physical assets while losing the international network that makes those assets productive. That outcome is an analytical inference from the supply chain’s complexity, not an official forecast of a particular conflict.
Three disruption scenarios
| Scenario | Likely operating effect |
|---|---|
| Blockade or shipping disruption | Fabs remain intact, but inputs and finished chips cannot move normally. Prices, delivery times, insurance and sanctions pressure rise quickly. |
| Invasion with attempted takeover | Combat, evacuation, cyber incidents and loss of external support could interrupt production. Occupation would not ensure continued output. |
| Physical destruction or prolonged shutdown | Lost capacity would be harder to replace and shortages could last for years while alternative plants are built and qualified. |
What the United States is doing
The CHIPS and Science Act established $39 billion in semiconductor incentives alongside research funding. The Commerce Department later announced up to $6.6 billion in direct funding for TSMC’s Arizona project, tied to more than $65 billion of planned investment across three leading-edge fabs in Phoenix (Commerce Department, November 2024).
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TSMC said the project was expected to create about 6,000 direct high-tech jobs and that its first Arizona fab was originally targeted to begin 4-nanometer production in the first half of 2025 (TSMC announcement). Those dates describe the original plan, not a guarantee that every milestone was met.
The Commerce Department has said U.S. policy aims to produce roughly 20% of the world’s leading-edge logic chips by 2030 (Commerce Department). Raimondo also described domestic advanced manufacturing and supply-chain resilience in Commerce remarks (speech).
Why Arizona reduces risk but cannot replace Taiwan quickly
- Arizona’s planned volume is only a fraction of TSMC’s Taiwan footprint.
- Fabs come online in stages, and each process must be qualified for particular customer designs.
- Advanced packaging and testing are separate bottlenecks.
- U.S. plants still rely on globally sourced equipment, materials, software and components.
- Operating them requires a large, specialized workforce.
- Domestic production generally costs more than concentrating output in Taiwan.
A second location improves resilience only when it has sufficient volume, compatible processes, packaging capacity and trained staff. The policy goal is a more reliable domestic supply, not instant independence from the global semiconductor system.
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What is established, what is a scenario, and what is speculation?
| Category | Examples |
|---|---|
| Verified | Raimondo’s May 8, 2024 warning; the reported 92% leading-edge U.S.-sourcing figure; TSMC Arizona funding, investment plans and job estimate. |
| Reasonable scenario | Shortages, higher prices, market losses, production delays and global supply-chain disruption after a blockade or conflict. |
| Unverified speculation | An exact GDP loss, a precise disruption duration, or a U.S. decision to destroy Taiwan fabs. Commentators have discussed disabling facilities, but no public U.S. policy establishes that outcome. |
Raimondo did not assess the likelihood or timing of an attack in the reported hearing. A Chinese seizure of TSMC should therefore be treated as a contingency used to illustrate concentrated supply-chain risk, not as a confirmed plan or forecast.
The bottom line
Raimondo’s wording was intentionally stark, but the underlying vulnerability is real: advanced-chip production is unusually concentrated in Taiwan, and TSMC’s output supports industries that underpin modern computing, communications, transport and defense. A conflict could cause a historic technology and industrial shock even if China failed to operate the captured fabs. U.S. investment in Arizona and other domestic capacity lowers exposure over time, but it cannot quickly reproduce Taiwan’s scale, ecosystem or global role.
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